THE EFFECT OF CAPITAL INFLOW ON POVERTY REDUCTION IN NIGERIA

Abstract

This study used annual data that spanned 35 years, starting from 1986 to 2020 to analyze the effect of inflows of capital on poverty reduction in Nigeria. Autoregressive Distributed Lag (ARDL) method was used to investigate both the short and long-run relationship. The ARDL Bound co-integration test showed evidence of a long-run relationship between capital inflows and poverty reduction. The result showed that both in the short and long-run, capital inflows positively impacted poverty reduction. Also, in the short run, there was a negative relationship between human capital and poverty reduction but in the long-run the relationship between human capital and poverty reduction is positive. However, government spending did not contribute to the reduction of poverty either in the short-run or long-run, likewise gross capital formation. Based on the findings from this study, the onus is on the government to put more effort on how to increase capital inflows and also ensure that the capital is distributed to the appropriate quarters where it will be used for productive activities that will bring drastic reduction to the poverty rate in the country.